David
A. Ashen, Esq., and John M. Melody, Esq., Office of the General Counsel, GAO,
participated in the preparation of the decision.

DIGEST

1.
Protest is denied in procurement for commercial resupply services for
International Space Station where source selection authority reasonably
determined that outstanding and very good past performance of protester’s
proposed subcontractors did not warrant an overall significant strength where
protester itself lacked significant relevant past performance and technical
expertise, leaving subcontractors responsible for technical performance and
approximately [REDACTED]% of overall
contract effort.

2. Protest is
denied in procurement for commercial resupply services for International Space
Station where agency reasonably ascertained significant financial risk to the
government from protester’s proposal under fixed-price prime contract to
subcontract technical performance and approximately [REDACTED]% of overall contract effort; significant development
and integration work, the risk and cost of which was underestimated, was to be
performed by subcontracting on a cost basis; protester’s business case,
although reflecting additional unrealistically optimistic assumptions,
nevertheless assumed that cost of performing would exceed contract payments
until last year of contract; protester had limited contract management
resources; and protester, a recently organized entity, proposed to finance
performance using only minimal internal financial resources, depending instead
on debt financing and obtaining additional investment for nearly all of
performance costs.

DECISION

PlanetSpace, Inc. protests the
National Aeronautics and Space Administration’s (NASA) award of a contract to
Orbital Sciences Corporation (OSC) under request for proposals (RFP) No.
NNJ08ZBG001R, for commercial resupply services for the International Space
Station (ISS). PlanetSpace challenges
the evaluation of proposals and resulting source selection.

We deny the protest.

The solicitation, issued as a commercial acquisition under
Federal Acquisition Regulation (FAR) part 12, contemplated the award of one or
more indefinite‑delivery/indefinite-quantity (IDIQ), fixed-price, 7-year
contracts, to deliver cargo from NASA to the ISS (including both pressurized upmass‑‑cargo
transported to the ISS‑‑and unpressurized upmass cargo), dispose of
unneeded cargo from the ISS and/or return cargo from the ISS to NASA, and
furnish various additional services. The
contracts are intended to satisfy NASA’s obligation under international
agreements to provide critical cargo resupply services to the ISS (such as air,
water, food, medicine, spare parts, and scientific experiments) from the
scheduled end of the Space Shuttle Program in 2010 to the scheduled end of the
ISS Program in 2015. The guaranteed
minimum under each contract was the negotiated value of 20 metric tons of cargo
upmass, with an additional potential guaranteed minimum value of 3 metric
tons return cargo downmass‑‑cargo returned from the ISS‑‑(if
that contract line item (CLIN) was accepted), while the total maximum value for
each contract was $3.1 billion. RFP
sect. 1.A.3. NASA’s overall cargo
requirement is for approximately 40 metric tons over a 5-year period. Hearing Transcript (Tr.) at 23-24.

Award was to be made using the tradeoff process set forth at
FAR sect. 15.101-1 and based on the evaluation of proposals under two criteria--mission
suitability and price--with mission suitability more important than price. Proposals were to be scored for mission
suitability using a 1,000-point scale under three factors: (1) technical approach
(550 points), with subfactors for system capabilities/ summary of
performance, ISS integration/demonstration, ISS resupply mission performance
plan, and risks; (2) management approach (400 points), with subfactors for
company information, performance milestones, and safety/mission assurance; and
(3) small business utilization (50 points).

Of significance here, past performance was not included as a
separate evaluation factor, but instead was to be evaluated as part of each
mission suitability subfactor. The past
performance evaluation was to include consideration of information to be
supplied by offerors concerning their own relevant contracts and the relevant
contracts of proposed significant subcontractors (defined as having
subcontracts likely to exceed $10 million) and teaming partners. RFP sections VII.A.4, amend. 3, exh. 2.

The RFP provided for evaluation of pricing under
three CLINs: CLIN 1--Standard
Resupply Services, CLIN 2--Non-Standard Services, and CLIN 3--Special Task
Assignments, with the CLIN 1 prices substantially more important than the CLIN
2 and CLIN 3 prices. Offerors were
required to complete pricing templates, which entailed entering under CLIN 1
fully burdened prices per kilogram of pressurized upmass cargo, unpressurized
upmass cargo, return downmass cargo, and disposal downmass cargo. RFP sect. VI.A.21.P2. The RFP further provided that offerors also
were to furnish mission pricing that “reflect[s] the offeror unique mission
configurations proposed,” RFP
amend. 6, RFP sections VI.A.19, VI.A.21.P2, and that “[a]s part of the evaluation,
a weighted average fixed price per kilogram” of cargo would be developed. RFP sect. VII.C.P2.

NASA received proposals from PlanetSpace, OSC and
SpaceX. After conducting written and
oral discussions, NASA requested final proposal revisions (FPR). The Source Evaluation Board (SEB) evaluated
the FPRs as follows:

PlanetSpace’s and OSC’s proposals received the same
adjectival scoring under the technical and management factors, as well as under
the mission suitability criterion overall, although PlanetSpace’s received a
higher total numeric score. The mission
suitability scoring for PlanetSpace reflected the SEB’s finding of three
significant strengths, four strengths, and three weaknesses under the technical
approach factor, and three significant strengths, four strengths, and five
weaknesses under the management factor.
The SEB assigned OSC’s proposal one significant strength,
five strengths, and four weaknesses under the technical factor, and three
significant strengths, three strengths, and one weakness under the management
factor.

As relevant here, three of the PlanetSpace’s significant
strengths (as well as several of its weaknesses) as assessed by the SEB were
directly related to its proposed teaming approach. In this regard, PlanetSpace proposed to
subcontract approximately [REDACTED]% of
the overall contract to (1) Lockheed Martin (LM), which in turn was to
subcontract part of its effort to Boeing, and (2) Alliant Techsystems, Inc.
(ATK), leaving only approximately [REDACTED]%
of the contract to be performed by PlanetSpace.
PlanetSpace Executive Summary, Oct. 8, 2008, at 4; Preaward Survey
at 4, 7; Preaward Survey Briefing at 5.
PlanetSpace’s proposal assigned itself primary responsibility for prime
contract execution, contract administration, financial management, and business
operations; assigned LM responsibility for program management, systems
integration, the orbital transfer vehicle, integration and test, the avionic
propulsion module, cargo return capsule, and mission operations; assigned
Boeing responsibility for ISS integration, cargo carriers and cargo processing;
and assigned ATK responsibility for launch vehicle development and launch site
operations. SEB FPR Report at 7.2-53;
PlanetSpace FPR Mission Suitability Proposal at M-19. Although the contract to be awarded was to be
on a fixed-price basis, PlanetSpace proposed that it would (1) subcontract
with LM and ATK on a cost-plus-fixed fee/cost-plus-incentive fee basis for
development, first unit assembly, integration, qualification and build, and for
first unit mission integration and operations, with LM and ATK in turn
subcontracting approximately [REDACTED]%
to [REDACTED]% of the development phase
to third tier vendors on a fixed-price basis for heritage (existing) hardware,
and (2) then transition to the procurement of first mission launch services and
subsequent missions on a fixed‑price basis. SEB FPR Report at 7.2-80; PlanetSpace
FPR Mission Suitability Proposal at M-18 to M-21.

The SEB assigned PlanetSpace’s proposal a significant
strength under the system capabilities/summary of performance subfactor based
on the generally outstanding (with some very good ratings) past performance of
its subcontractors on numerous highly relevant contracts for launch and orbital
vehicle development, ISS mission and cargo integration, and flight product
development; the SEB expected that this past performance would greatly enhance
the likelihood of successful performance of the commercial resupply services
contract. Likewise, the SEB assigned
PlanetSpace’s proposal a significant strength under the company information
subfactor of the management factor based on the past performance of the
PlanetSpace management team’s key personnel and subcontractors, including a
long history of accomplishments and successes by the subcontractors on highly
relevant contracts, such as launch vehicle components and manned spacecraft
development, sustaining, processing, and operations. In addition, the SEB assessed PlanetSpace’s
proposal a significant strength under the same subfactor based on its evaluated
highly sound and realistic management approach, with very suitable team members
and teaming arrangements, clear systems engineering and integration
responsibilities, and a comprehensive work breakdown structure.

The source selection authority (SSA) indicated in the source
selection decision (SSD) that he “agreed with all findings the SEB made
regarding any of the offerors,” but stated that he nevertheless “did not always
agree with the significance the SEB placed on a particular finding or with the
impacts the SEB identified in regards to a finding.” SSD at 8.
Specifically, regarding the significant strength the SEB assigned
PlanetSpace’s proposal under the system capabilities/summary of performance
subfactor due to the team’s past performance, the SSA stated that he

disagreed with the SEB assessment that this finding was a
significant strength. I determined the
significance of this finding was offset by PlanetSpace’s lack of experience in
development, production and operation of large, complex space systems and,
therefore, concluded this finding was not relevant for purposes of selection.

SSD at 11. Likewise,
regarding PlanetSpace’s significant strengths under the company information
subfactor of the management factor based on the past performance of the PlanetSpace
management team’s subcontractors’ key personnel and subcontractors, and
PlanetSpace’s highly sound and realistic management approach, the SSA concluded
that these strengths

were offset as being discriminators for selection because of
the absence of a corresponding strength regarding the prime contractor’s
abilities to perform the contract. It
can be a significant strength to have strong subcontractors; however, I did not
believe these findings should be discriminators for selection when almost all of
the technical expertise appeared to reside at the subcontractor level.

SSD at 12.

In addition, the SSA concluded that six of the weaknesses in
PlanetSpace’s proposal identified by the SEB should be considered significant
discriminators in the source selection.
In this regard, PlanetSpace proposed use of an alternate, larger launch
vehicle (the Atlas V rocket) to provide initial cargo delivery capability in
December 2011, prior to the readiness of its proposed new launch vehicle
(Athena III), which was under development.
The SEB found this to be a weakness under the technical approach factor
because even with the proposed use of the alternate launch vehicle, PlanetSpace
would not meet the cargo resupply requirements in 2010 or most of 2011. The SSA also determined that use of the
alternate launch vehicle was a “significant discriminator” for selection
purposes because PlanetSpace was the only offeror that proposed a configuration
requiring verification and integration of its orbital vehicle with two launch
vehicles, which potentially increased the technical and schedule risk to
NASA. Further, while the SEB only
identified as a weakness in PlanetSpace’s technical approach the fact that
heritage components would need to be requalified to meet the vibro-acoustic
environment of the new launch vehicle, the SSA concluded that requalification
posed a “significant technical challenge” due to the performance
characteristics of the [REDACTED] in the
new launch vehicle. The SEB noted as a
further weakness under the technical approach PlanetSpace’s proposal of a
margin (distance) between the static payload envelope and the outside diameter
of the payload fairing or shroud that was smaller than any fairing margin in
current worldwide industry experience, which the SEB concluded represented a
potential risk to the promised upmass delivery capability. The SSA believed that resolution of the
fairing issue would be a “significant technical challenge” to PlanetSpace
because changes in fairing design can drive changes to schedule and cargo
environments and reduce upmass capacity.
SSD at 12.

Under the management approach factor, the SEB assigned a
weakness based on PlanetSpace’s proposed use of cost-plus subcontracts up until
first flight, with the subcontractors responsible for the majority of the
work. The SSD indicated that, while
PlanetSpace’s response to NASA’s discussion question in this
regard--PlanetSpace indicating that it would manage this risk through
incentives and cost controls--convinced the SEB to reduce the initial
assessment of a significant weakness to a weakness, the SSA concluded as
follows:

[I] believed the subcontracting structure still represented
a significant risk to the successful performance of the program. I believed it was extremely risky for PlanetSpace
to have a fixed-price contract with NASA when most of the effort in the early
stages of the contract would be performed under cost type subcontracts. Moreover, I questioned whether PlanetSpace
could successfully manage much larger subcontractors responsible for the
majority of the performance under the contract.
Furthermore, although one was not required by the solicitation, I was
concerned that the proposal did not contain a backup plan in the event one of
the major subcontractors was unable to perform given the sizable amount of
responsibilities PlanetSpace proposed to place at the subcontractor level.

SSD at 12. The SEB
assessed another weakness based on the “high financial risk to the Government”
attending PlanetSpace’s proposed early completion of and, therefore, payment
for ISS integration; the SEB determined that PlanetSpace’s proposed ISS
integration schedule, based on ISS integration approximately 9 months prior to
the SEB’s estimate, was unrealistic. SEB
FPR Report at 7.2-84 to 85. While the
SEB considered this to be only a weakness, and not a significant weakness, the
SSA found that

the financial risk PlanetSpace proposed to assume was a
discriminator for selection. PlanetSpace
would be making a considerable investment in the program with two different
launch vehicles, yet did not project it would reflect positive cumulative cash
from operations until nearly the end of the contract. During the deliberations on selection, I was
informed that NASA would not be required to order the early mission involving
the proposed use of the alternate launch vehicle. While not ordering the alternate launch
vehicle would reduce PlanetSpace’s overall cost, this action also would cause
the NASA payments to PlanetSpace to occur later, further threatening this
business case.

SSD at 13. Finally,
the SEB assessed a weakness based on the fact that, in addressing the issue of
Federal Aviation Administration (FAA) licenses and permits PlanetSpace’s
proposal indicated a number of assumptions that appeared to indicate a lack of
understanding of FAA licensing requirements for commercial launch and reentry
operations, but did not classify the weakness as “significant,” concluding that
any lack of understanding could be corrected during performance. The SSA, however, viewed the weakness as yet
another “discriminator because it demonstrated a lack of understanding about
the basic requirements of the commercial nature of [commercial resupply
services].” SSD at 13.

Having determined that SpaceX’s proposal was the
highest-rated, and thus was in line for the first award, the SSA compared OSC’s
and PlanetSpace’s proposals. The SSA
noted that, while OSC proposed to provide a full range of services in 2012,
PlanetSpace proposed to provide a full range of services only by the end of
2013. Furthermore, consistent with the
above concerns regarding PlanetSpace’s proposal, the SSA considered
PlanetSpace’s management approach to be an even more important “key
discriminator” than the schedule for commencement of services. The SSA noted as a particular concern the fact
that much of the work would be performed on large cost-reimbursement
subcontracts, while PlanetSpace, the prime contractor, would perform under a
fixed-price contract, and the fact that PlanetSpace did not project it would
recoup its sizable investment in the commercial resupply services program until
near the end of the contract; the SSA concluded with respect to financial risk
that

[t]hese risks made me believe it was highly unlikely
PlanetSpace would have the ability needed to address technical challenges in
its proposal such as the re-qualification of heritage components to new launch
vehicle environments and the potential changes to fairing size to accommodate
unpressurized cargo.

SSD at 16. The SSA
also considered that PlanetSpace’s subcontractors were responsible for most of
the technical aspects of the proposal and that PlanetSpace itself had no
relevant experience managing a contract with this level of complexity in a
fixed-price environment, while OSC’s proposal was assigned a significant
strength because of its utilization of existing processes and tools to manage
fixed-price spacecraft development, operations and repetitive production
contracts, OSC’s subcontracting team had a much smaller role in contract
performance, and OSC had extensive in-house expertise in specific areas of the
CRS requirements. The SSA concluded
that, accordingly, he “had much higher confidence” in OSC’s ability to provide
resupply services on a fixed-price basis, id., and that OSC’s proposal
“was superior due to the serious Management risks inherent in the PlanetSpace
proposal.” SSD at 17. Indeed, while recognizing PlanetSpace’s lower
price, the SSA stated that he “could not conduct [a] ‘typical’ trade-off
analysis since I believed there was a low likelihood PlanetSpace could
successfully perform the contract.” Id. The SSA concluded that SpaceX’s and OSC’s
proposals represented the best value to the government.

Upon learning of the resulting awards to SpaceX and OSC, PlanetSpace
filed this protest with our Office challenging both awards. Subsequently, PlanetSpace abandoned its
challenge to SpaceX’s award.

In reviewing protests of alleged improper evaluations and
source selection decisions, it is not our role to reevaluate submissions;
rather, we will examine the record to determine whether the agency’s judgment
was reasonable and in accord with the stated evaluation criteria and applicable
procurement laws and regulations. Panacea
Consulting, Inc., B 299307.4, B 299308.4, July 27, 2007, 2007 CPD para. 141 at
3. Here, based on our review of all of
PlanetSpace’s timely arguments, we find no basis for questioning the award to
OSC. We discuss PlanetSpace’s principal
arguments below.

TEAMING APPROACH

Subcontractor Performance

PlanetSpace asserts that the evaluation of its teaming
approach was unreasonable and/or otherwise improper. As an initial matter, the protester contends
that the consideration given to past performance in the SSD was inconsistent
with the RFP, which provided that offerors without a record of relevant past
performance or for which information on past performance is not available “will
not be evaluated favorably or unfavorably on past performance.” RFP amend. 3, sect. VII. PlanetSpace asserts that, notwithstanding
this provision, the agency evaluated its proposal unfavorably based on a
finding that it lacked relevant past performance.

The record does not support PlanetSpace’s assertion. As discussed above, in considering the SEB’s
assessment of significant strengths based on the past performance of
PlanetSpace’s subcontractors/team members, the SSA simply disagreed with the
SEB’s finding of a significant strength.
Again, the SSA concluded that the finding was “offset by PlanetSpace’s
lack of experience in development, production and operation of large, complex
space systems,” and that the subcontractors’ past performance should not be “discriminators
for selection when almost all of the technical expertise appeared to reside at
the subcontractor level.” SSD at 11-12.[3] Thus, the SSA determined only that the
protester’s record of past performance should not be considered as a
discriminator; he did not downgrade the proposal overall under the past
performance factor.

Financial Risk

As discussed above, PlanetSpace’s reliance on cost-based
subcontracting for risky development work in conjunction with its expected
negative cash flow under the contract was evaluated as posing a high risk to
the government. PlanetSpace asserts that
the agency’s consideration of the financial risk to the government posed by the
firm’s teaming approach was unfounded and improper.

Again, PlanetSpace proposed to subcontract approximately [REDACTED]% of the overall contract to LM
(which in turn would subcontract part of its effort to Boeing) and ATK, leaving
only approximately [REDACTED]% of the
contract‑‑including such generally non‑technical areas as
overall responsibility for prime contract execution, contract administration,
financial management, and business operations‑‑to be performed by
PlanetSpace. In addition, although its
contract with NASA was required to be on a fixed-price basis, PlanetSpace
proposed that it would subcontract with LM and ATK on a cost-plus-fixed
fee/cost-plus-incentive fee basis for development, first unit assembly,
integration, qualification and build, and for first unit mission integration
and operations, with LM and ATK in turn subcontracting approximately [REDACTED]% to [REDACTED]%
of the development phase to third tier vendors on a fixed-price basis for
heritage hardware. PlanetSpace FPR
Executive Summary at 4; PlanetSpace FPR Mission Suitability Proposal at M-18 to
M-21; SEB FPR Report at 7.2-53, 80.
Further, PlanetSpace estimated that the cost of performing the contract
would exceed contract payments from NASA until [REDACTED],
with PlanetSpace’s cumulative debt under the contract peaking at $[REDACTED] million in [REDACTED]. In this
regard, PlanetSpace, organized in 2006, proposed to utilize only $[REDACTED] million of shareholder equity
in performing the contract. As explained
in its management proposal, PlanetSpace proposed instead that, except for
certain independent research and development expenditures on the part of its
team members, from which it claimed to benefit, the remainder of the cost of
performance would be financed through potential future debt and investment from
third parties. PlanetSpace FPR Mission
Suitability Proposal at M-2 to M-6.[4]

NASA determined that PlanetSpace’s approach posed
significant financial risk to the government based in part on the agency’s
determination that PlanetSpace’s estimates were based on unrealistically
optimistic assumptions. For example,
PlanetSpace assumed that it could successfully demonstrate, and be paid for,
ISS Integration [REDACTED] months prior
to launch by satisfying 95% of the applicable requirements. However, the record indicates that ISS
integration is a major readiness milestone involving completion of hardware and
software, and that no orbital vehicle has ever demonstrated ISS integration so
far in advance of launch. Moreover, the
RFP made no provision for satisfying less than 100% of the ISS integration
requirements, and NASA in fact anticipated 100% compliance. Rather than [REDACTED]
months prior to launch, NASA estimated that the ISS integration milestone most
likely could be satisfied no earlier than 4 months prior to launch, with the
effect on PlanetSpace’s assumed schedule being a delay in $[REDACTED] million of payments under the
contract, and an increase in the maximum cumulative debt under the
contract. PlanetSpace FPR Management
Proposal at M-44; Tr. at 792, 847, 852-53, 999-1005; SEB FPR Report sect.
7.2-85.

In addition, PlanetSpace’s estimates reflected payment for
an optional Atlas V mission early in contract year 2011, with more than [REDACTED] the capacity and at more than [REDACTED] the cost of the proposed Athena III
missions (the launch vehicle under development) in contract year 2012 and
later. While the option for early
delivery of cargo was considered desirable, the agency viewed the necessity for
PlanetSpace to verify and integrate two launch vehicles as increasing technical
and cost risk. Moreover, the chairman of
the management evaluation committee testified at the hearing held by our Office
in this matter that it was unclear whether the ISS in fact would be in a
position to accommodate and take advantage of the much higher capacity offered
by PlanetSpace’s proposed Atlas V mission.
In this regard, PlanetSpace’s proposed Atlas V mission had a capacity of
[REDACTED] kg versus [REDACTED] kg for PlanetSpace’s proposed Athena
III missions at less than [REDACTED] the
price, and 3,300 kg for SpaceX’s missions at approximately [REDACTED] the price, which might lead NASA to
order a much less expensive mission with only the capacity actually
required. Tr. at 323-29, 1134-41. Finally, although the effect of the agency’s
not ordering the optional, significantly higher‑priced Atlas V mission,
or of any delay in the mission, could not be ascertained with precision, the
agency found that PlanetSpace’s own calculations appeared to indicate that an
Athena‑only contract effort, replacing the Atlas V with lesser-capacity,
lower‑priced missions using the under-development Athena III, would
further increase PlanetSpace’s maximum cumulative debt. PlanetSpace Preaward Survey Response, Dec.
10, 2008, at 3-4.

Further, while PlanetSpace claimed in its proposal that,
based on its assessment of development phase cost risk, it had included in its
business plan an estimated potential cost growth of $[REDACTED] million, which it would fund through debt financing,
NASA questioned whether PlanetSpace had fully costed the likely required
development efforts. In this regard,
NASA noted that PlanetSpace had assumed technology readiness levels of [REDACTED] (on a scale 1 to 9 with 9
representing an operational system), for more than half of listed subsystem
components, which the agency viewed as unrealistically high. PlanetSpace FPR Management Proposal at M‑20
to M‑21; PlanetSpace FPR Technical Proposal at T‑25 to
T-26; Backup FPR Slides at 28,765; Tr. at 797-99.[5]

PlanetSpace’s proposal acknowledged the potential high risk
resulting from the use of cost-plus development subcontracts as follows:

Given that PlanetSpace is a small company with a
[firm-fixed-price] NASA contract and with [cost-plus-fixed fee/incentive fee]
development subcontracts awarded to Lockheed Martin and ATK it follows that
lack of effective subcontract controls could result in significant schedule
delays and cost overruns.

PlanetSpace FPR Technical Proposal at T-128/129. PlanetSpace nevertheless assumed that it
would overcome these challenging circumstances and control its costs of
performance through effective cost controls.
However, the record shows that the SSA was not convinced, finding that
PlanetSpace’s proposed use of cost-plus subcontracts “in the early stages of
the contract,” until first flight, was “extremely risky.” SSD at 12.
Given the limited cost margin available under PlanetSpace’s proposed
approach to accommodate potential cost overruns passed on by its
subcontractors; the fact that Lockheed and Boeing, although capable
contractors, were known by NASA to be “not as cost conscious as they could be”;
PlanetSpace’s unrealistic or incorrect assumptions, including those regarding
the proposed ISS integration schedule and FAA requirements, that underlay its
proposed approach; such evaluated “stressors” on cost and schedule as changing
fairing size to accommodate unpressurized cargo and accomplishing verification
and integration of its orbital vehicle with two launch vehicles; and the
challenge for a fairly small management team to manage subcontractors
performing over [REDACTED]% of the
contract effort, the SSA concluded that the risks associated with PlanetSpace’s
contracting approach made it “highly unlikely” that PlanetSpace would
successfully perform the contract and provide timely delivery of required cargo
to the ISS. SSD at 16; Tr.
at 26-27, 55-75.

PlanetSpace disagrees with the SSA’s conclusion in this
regard, but we find that it has not shown that conclusion to be unreasonable or
otherwise improper. For example,
PlanetSpace asserts that the agency’s focus on financial risk and the resources
available to PlanetSpace was improper because those matters concern offeror
responsibility. See Federal
Acquisition Regulation (FAR) sect. 9.104-1.
However, an agency may use traditional responsibility factors in
evaluating proposals where, as here, a comparative evaluation of those areas is
to be performed. SeeZolon
Tech, Inc., B‑299904.2, Sept. 18, 2007, 2007 CPD para. 183 at 8. Further, in evaluating proposals, an agency
properly may take into account specific, albeit not expressly identified,
matters that are logically encompassed by, or related to, the stated evaluation
criteria. Independence Constr., Inc.,
B-292052, May 19, 2003, 2003 CPD para. 105 at 4.
Here, the solicitation provided for evaluation, under the performance
milestones subfactor, of “the overall risk that the payment schedule provides
to NASA.” RFP sect. VII.B. In our view, this solicitation language logically
encompassed NASA’s consideration of whether there was a significant risk to
timely performance of the contract, in view of the substantial risk of cost
overruns on the part of PlanetSpace’s subcontractors (the cost of which
PlanetSpace was required to bear under its fixed-price contract), the resources
PlanetSpace proposed to commit to the contract, and the likely schedule of
payments by the agency under the contract.

PlanetSpace asserts that the evaluated financial risk of its
proposed approach fails to account for what it estimates to be the true,
effective proportion of its overall contract effort that is cost-based, that
is, approximately [REDACTED]%.[6] As noted above, however, NASA’s concerns
extended beyond the proportion of the contract effort that was expected to be
cost-based. In this regard, NASA
evaluated the technology readiness levels assumed by PlanetSpace as
unrealistically high, and found the assumed overall development costs to be
inadequate in light of the significant effort that would be required to
integrate multiple components for [REDACTED]
different orbital vehicle configurations and a launch vehicle. Furthermore, it was NASA’s experience that
required integration efforts had been a basis for cost increases under prior
NASA cost-plus contracts with LM and Boeing.
Tr. at 353-54, 897‑900.
Indeed, the SSA questioned why LM and Boeing had not participated in the
commercial resupply services effort on a fixed-price basis if in fact the
likely cost of performance was reasonably understood and controllable. Tr. at 283‑84.

PlanetSpace further questions the evaluated financial risk
of its proposed approach by citing a brief excerpt from the SSA’s day-long
hearing testimony, during which he indicated that he had not been informed
during his briefing by the evaluators that PlanetSpace had proposed to use
“design to cost” and an earned value management system as part of its cost
controls. Tr. at 362-63. This argument is without merit, because the
SSA also testified that he had discussed with the SEB a page from its report
that addressed both the risks associated with PlanetSpace’s cost-plus
subcontracting and specific cost control measures proposed by PlanetSpace,
including, specifically, the proposed “design to cost” and earned value
management system. SEB FPR Report at
7.2-80, Tr. at 355-56. Further, the
record includes testimony from the chairman of the management committee, as
well as the relevant briefing slide (different from the above excerpt from the
SEB Report), which establishes that the SSA otherwise was briefed by the SEB
about the inclusion of “design to cost” and an earned value management system as
part of PlanetSpace’s cost controls.
Tr. at 1043‑46, Backup Briefing Slides at Record
28,765. In any event, a contracting
officer properly may base his or her independent judgment on reports and
analyses prepared by others. Comprehensive
Health Servs., Inc., B--310553, Dec. 27, 2007, 2008 CPD para. 9 at 11;
seeUniversity Research Co., LLC, B-294358 et al., Oct.
28, 2004, 2004 CPD para. 217 at 8.
Here, the SEB specifically considered and discussed in its report
PlanetSpace’s proposed cost control measures, including its reference to
“design to cost” and an earned value management system, and found them to be
insufficient to overcome the cost risk associated with PlanetSpace’s
contracting approach. SEB FPR Report at
7.2-80; Tr. at 901-05. PlanetSpace has
not shown the agency’s determination in this regard to be unreasonable.

PlanetSpace asserts that, even accepting the evaluated risks
associated with its contracting approach, the agency’s overall view of its
proposal simply failed to account for the technical advantages offered by the
participation of LM, Boeing, and ATK. In
other words, PlanetSpace is essentially asking that we find that the agency was
required to subordinate its serious concerns about the ability of
PlanetSpace--the prime contractor--to perform, to the benefits of the
subcontractors’ participation in the contract effort, as evaluated by the
SEB. There is no basis for us to make
such a finding. As noted, we will review
proposal evaluations only to determine whether the agency’s conclusions were
reasonable and consistent with applicable procurement laws and regulations. Panacea Consulting, Inc., supra. We think the SSA clearly acted reasonably in
concluding that PlanetSpace’s own lack of technical and management capability
and significant, relevant past performance, the fact that PlanetSpace would be
the prime contractor to the agency, and the high financial risk associated with
PlanetSpace’s proposal, were more significant considerations than, and thus
offset, the favorable technical past performance of LM, Boeing and ATK.

RUSSIAN ENGINES

PlanetSpace asserts that NASA did not adequately account in
the source selection for the risk associated with OSC’s proposed use of Russian
engines in the first stage of its launch vehicle. In this regard, OSC proposed to use the Taurus
II medium-class launch vehicle, a vehicle under development by OSC, which would
use Aerojet’s AJ26-62 liquid-propellant engines, a modernized version of
existing Russian NK-33 rocket engines manufactured in the late 1960s and early
1970s. Although the SEB initially
determined that OSC’s proposal to use 35-year-old engines represented a
substantial or significant risk to the feasibility of OSC’s production and
delivery capability, the evaluators, based on information furnished in response
to the agency’s discussion question, ultimately reduced the assessed risk,
finding OSC’s approach to pose technical and schedule risks warranting only an
ordinary, and not a significant, weakness.
PlanetSpace asserts that a significant risk was warranted.

The evaluation in this regard was reasonable. In determining that OSC had alleviated most,
but not all of the agency’s initial concerns, the evaluators considered a
number of mitigating factors. As an
initial matter, the agency noted that not only did Aerojet have in its
possession [REDACTED] NK-33 engines at
its Sacramento, California plant, a sufficient number for the [REDACTED] flights (at [REDACTED] engines per flight) proposed in its model task order,
but in addition, more than [REDACTED] additional
NK-33 engines were at the engine manufacturer’s facilities in Russia. Further, OSC reported that Aerojet, which had
experience performing service life extension for the Titan II engines, had
undertaken significant work [REDACTED]. Further, OSC reported that the NK-33 engines
(including those in both the United States and Russia) had been stored in
humidity-controlled conditions with no documented stress corrosion cracking.[7] In addition, as evidence of the favorable
condition of the engines, OSC reported that one of the NK‑33 engines in
Russia, originally manufactured in 1972, had been successfully test fired twice
in September 2008. Finally, while
final approval from Russia for use of the engines in OSC’s Taurus II launch
vehicle had not yet been obtained, the agency noted that OSC had completed all
of the licensing steps and was only awaiting final approval; Russia had
previously granted licenses for use of the engines on other vehicles; and
testing could begin prior to approval for actual launch operations. In these circumstances, the agency determined
that OSC’s approach represented only an ordinary weakness.OSC FPR Mission Suitability Proposal at 10-12, 19, 32-36,
73-80; SEB FPR Report at 7.1-16 to 18; SSD at 9; Tr. at 397, 487-91,
717-26, 767, 1226-33. PlanetSpace has
not shown that this determination was unreasonable.

COST

Noting that the SSD did not include a total evaluated
price for any of the offerors, PlanetSpace asserts that NASA did not adequately
consider price--in particular, PlanetSpace’s price advantage--in the source
selection.

Agencies must consider cost to the government in evaluating
proposals, 10 U.S.C. sect. 2305(a)(3)(A)(ii) (2006), and while it is up to the
agency to decide upon some appropriate and reasonable method for evaluating
offerors’ prices, an agency may not use an evaluation method that produces a
misleading result. SeeBristol--Myers
Squibb Co., B--294944.2, Jan. 18, 2005, 2005 CPD para. 16 at 4; AirTrak
Travel et al., B‑292101 et al., June 30, 2003, 2003 CPD para. 117
at 22. The method chosen must include
some reasonable basis for evaluating or comparing the relative costs of
proposals, so as to establish whether one offeror’s proposal would be more or
less costly than another’s. Id.; seeR&G Food Serv., Inc., d/b/a Port-A-Pit Catering Servs., LLC, B‑296435.4,
B-296435.9, Sept. 15, 2005, 2005 CPD para. 194 at 4; cf. FAR sect. 15.405(b)
(primary concern is the overall price the government will actually pay).

The record indicates that price was reasonably considered in
the source selection. In this regard,
offerors were required not only to furnish a fully burdened price per kilogram
of pressurized upmass cargo, unpressurized upmass cargo, return downmass cargo
and disposal downmass cargo, but also a total price for particular types of
resupply missions using the offeror’s unique mission configurations. RFP sect. VI.A.21.P2; Amend. 6, RFP sections
VI.A.19, VI.A.21.P2. Further, this
pricing was reported in various detailed formats to the SSA. For example, a summary of one of many
detailed pricing charts presented to the SSA indicated the relative weighted
per kg price for cargo as follows:

Final Source Selection Presentation at 126. Another of the pricing charts presented to
the SSA indicated the overall mission price for a combined pressurized upmass
and disposal downmass mission using the offeror’s unique configuration as
follows:

Overall Pressurized
Upmass/Disposal Downmass

Mission Price in $
Millions

OSC Basic

OSC Enhanced

PlanetSpace

SpaceX

Capacity

2000/2000 kg

2700/2700 kg

[REDACTED] kg

3310/3310 kg

CY
2010

$[REDACTED]

(800/500 kg)

--

--

$[REDACTED]

CY
2011

$[REDACTED]

(1575/1775/2000 kg)

--

$[REDACTED]

(Atlas V‑‑[REDACTED] kg)

$[REDACTED]

CY
2012

$[REDACTED]

--

$[REDACTED]

$[REDACTED]

CY
2013

$[REDACTED]

$[REDACTED]

(2500/2700 kg)

$[REDACTED]

$[REDACTED]

CY
2014

$[REDACTED]

$[REDACTED]

$[REDACTED]

$[REDACTED]

CY
2015

$[REDACTED]

$[REDACTED]

$[REDACTED]

$[REDACTED]

CY
2016

$[REDACTED]

$[REDACTED]

$[REDACTED]

$[REDACTED]

Final Source Selection Presentation at 119.

As is apparent from this information presented to the SSA,
OSC’s pricing exceeded PlanetSpace’s, usually by a significant margin. Thus, the information presented to the SSA
indicated that OSC’s overall weighted price per kg of pressurized upmass cargo
($[REDACTED] basic/$[REDACTED] enhanced) was approximately [REDACTED] that of PlanetSpace ($[REDACTED]), while OSC’s overall price for a
pressurized upmass cargo and disposal downmass cargo mission in CY 2016 ($[REDACTED] million for a 2000/2000 kg basic
mission or $[REDACTED] million for an
2700/2700 kg enhanced engine mission) was significantly higher on either an
overall mission or per kg basis than PlanetSpace’s ($[REDACTED] million for a [REDACTED]
kg mission). Although agency
evaluators did not calculate a total evaluated price for each offeror, the SSD
stated that OSC’s overall pricing (as well as its overall pricing for the
“substantially more important” CLIN 1 for standard resupply services, RFP
sect. VII.C), was the highest, with PlanetSpace’s pricing being the next
highest and SpaceX’s being the lowest.
SSD at 16-17. Further, the
record indicates that the SSA recognized that OSC’s proposal was “significantly
more costly” than PlanetSpace’s, estimating that OSC’s overall price was
“around [REDACTED] per kilogram” and
PlanetSpace’s was “probably [REDACTED] to
[REDACTED] per kilogram in rough order of
magnitude.” Tr. at 159. Indeed, the record indicates that
PlanetSpace’s above price advantage as perceived by the SSA was even greater
than that claimed by PlanetSpace--which calculated that OSC’s proposal was [REDACTED]% to [REDACTED]%
more expensive than PlanetSpace’s--during this litigation. PlanetSpace Comments, Mar. 2, 2009, at
66-67. In these circumstances, we find
no basis to conclude that the source selection was based on a failure by the
agency to consider, or the agency’s misunderstanding of, PlanetSpace’s price
advantage over OSC.

[3]
PlanetSpace asserts that the SSD mischaracterizes the extent of PlanetSpace’s
own past performance, failing to account for the fact that it entered into an
unfunded Space Act agreement with NASA in 2007 for development of a commercial
resupply system. PlanetSpace’s initial,
January 13, 2009, protest indicated its understanding (presumably on the basis
of a January 9 debriefing) that the SEB had discounted the agreement in the
evaluation (finding that performance had been limited). Protest at 18. Nevertheless, PlanetSpace challenged NASA’s
treatment of the agreement for the first time in its March 2 comments on the
agency report, more than 10 days after learning the basis for the
argument. Accordingly, the argument is
untimely. 4 C.F.R sect. 21.2(a)(2)
(2008). In any case, we think the agency
could reasonably determine that PlanetSpace’s limited performance under this
single, unfunded agreement, using a different management team than that proposed
in its FPR, did not demonstrate significant, relevant past performance. See SEB FPR Report at 7.2‑51;
Tr. at 226, 625, 644‑47, 657, 681-95.

[4]
The December 2008 preaward survey concluded that PlanetSpace had failed to
demonstrate that it had or had the ability to obtain financial resources adequate
to perform the contract. Preaward
Survey, Dec. 12, 2008, at 3-4, 7-10.
However, the contracting officer did not make a determination regarding
PlanetSpace’s responsibility, and the survey was not provided to the SSA. Contracting Officer’s Statement of Facts at
79.

[5]
While PlanetSpace claimed it had included in its business plan an estimated
potential cost growth of $[REDACTED] million,
it is unclear whether the amount was reflected in its calculation of maximum
cumulative debt ($[REDACTED] million in
2013). In this regard, it is clear from
PlanetSpace’s proposal that the estimated maximum cumulative debt of $[REDACTED] million did not include what
PlanetSpace terms a “20% management reserve,” the claimed effect of which would
be to increase the maximum cumulative debt from $[REDACTED]
million to $[REDACTED] million. PlanetSpace FPR Management Proposal at
M-3.

[6]
PlanetSpace’s estimate of [REDACTED]% as
the true, effective proportion of its overall contract effort that would be
cost-based, was calculated on the basis that a reported [REDACTED]% of the contract effort would be expended for
development work under cost‑based subcontracting with LM and ATK, which
in turn would subcontract [REDACTED]% to [REDACTED]% of that effort to third tier
vendors under fixed-price subcontracts. See
Tr. at 897-99, 916-17, 1127-28.

[7]
Also, NASA personnel inspected the warehouse in the United States where the
engines are stored. Tr. at 767, 1228.